Long yields stay higher after Fed policy decision

Short-term Treasurys turned higher on Wednesday, pushing the 2-year note yield to session lows, after the Federal Reserve gave a strong signal that it was on track to raise interest rates sometime next year, suggesting confidence in the U.S. economy.

"Based on its current assessment, the committee judges that it can be patient in beginning to normalize the stance of monetary policy,'' the Fed said in a statement. Significantly, the Fed said it viewed that statement as ``consistent'' with its previous language that it would be a considerable time before it hiked rates.

The U.S. 10-year benchmark Treasury note yield climbed to 2.13 percent, down 10/32 in price, after closing at 2.071 percent on Tuesday. Meanwhile, the 30-year was last down 26/32 in price and yielding 2.73 percent. It briefly touched a session high of 2.74 percent after the the Fed decision.

Read MoreWall Street eyes Fed amid ruble, oil rout

Symbol
Yield
 
Change
%Change
US 3-MO
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US 1-YR
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US 2-YR
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US 5-YR
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US 10-YR
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US 30-YR
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Brent futures fell more than 1 percent on Wednesday, down for a sixth straight session, with persistent worries of a supply glut keeping prices near a five-and-a-half-year low, under $60 a barrel. U.S. crude dropped 64 cents to $55.29 a barrel after touching the lowest since May 2009 at $53.60 on Tuesday.

Russia's economic turmoil also remains at the forefront of investors' minds, as global markets watch to see what the government will do to halt the ruble's slide. The country's central bank has already hiked rates to 17 percent, and its finance ministry announced on Wednesday that it had started selling its foreign currency stock.

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An early result of the steep decline in energy costs was the unexpectedly big drop in the U.S. consumer price index in November. The CPI's 0.3 percent fall last month was the biggest in nearly six years, spurring buying in Treasuries and pushing yields down from their initial highs.

``Today's CPI report is a reminder on how low inflation has fallen,'' said Mike Lorizio, head of Treasuries trading at John Hancock Asset Management in Boston. The weak inflation outlook has hammered Treasury Inflation-Protected Securities, whose value is referenced against the CPI.

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Minutes from the Bank of England's (BoE) latest rate-setting meeting were also released Wednesday, and showed that policymakers remain divided on whether or not to hike interest rates in the U.K.

Two members of the central bank's Monetary Policy Committee (MPC), Martin Weale and Ian McCafferty, again voted for an interest rate hike in December. Both are widely viewed as the most hawkish policymakers at the Bank of England.

Reuters contributed to this report.